SOVEREIGN RISK IN THE CLASSICAL GOLD STANDARD ERA

Gavin Cameron, Prasanna Gai () and Kang Yong Tan ()

CAMA Working Papers from Australian National University, Centre for Applied Macroeconomic Analysis

Abstract: This paper explores the determinants of sovereign bond yields during the classical gold standard period (1872-1913). Using the Pooled Mean Group methodology, we find that the main benefit of the gold standard was as a short-sighted device that enhanced a country's reputation in international capital markets. By conveying important information to investots and enhancing the speed of adjustment of sovereign bond spreads to long-run equilibrium levels, the gold standard allowed country risk to be priced more effectively. In contrast to other studies, our results suggest that fundamental factors were more important in determining a country's creditworthiness in the long-run than the exchange rate regime per se.

JEL-codes: F33 F34 F41 N10 N20 (search for similar items in EconPapers)
Date: 2006-03
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http://cama.anu.edu.au/Working%20Papers/Papers/2006/Cameron_Gai_Tan_112006.pdf (application/pdf)

Related works:
Journal Article: Sovereign Risk in the Classical Gold Standard Era (2009)
Working Paper: Sovereign Risk in the Classical Gold Standard Era (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:acb:camaaa:2006-11

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